Periodic expenses include things like annual vehicle registration, major car repairs, and holiday gift giving. These are the hardest expenses to plan for and the ones most likely to take you by surprise. These plans average your usage over time and charge the same each month, rather than spiking during times of increased usage (think summer AC bills in hot climates). Utilities can become a fixed expense if your service provider offers an “equalizer” plan. By keeping track of these expenses over time, you can get a better idea of how much you’re spending each month and plan accordingly. Variable expenses include such things as groceries, gas for your vehicle, utilities, entertainment expenses, and clothing. Just as the name says, these are your expenses that will vary month-to-month and are probably the largest spending category. They may vary slightly from year-to-year (say, a rent increase) but overall you can count on them to stay the same for at least a year at a time. Your mortgage or rent, car payment, and insurance are examples of fixed expenses. These are the expenses you have that don’t change month-to-month. Knowing what types of expenses you have and how to plan for them can help you manage your money more effectively and get off the paycheck-to-paycheck merry-go-round. If you don't yet have a high-yield savings account consider opening one, such as Marcus by Goldman Sachs High Yield Online Savings, and earning 16 times more interest than traditional accounts.One of the most important parts of planning and sticking to your budget is understanding the differences between fixed, variable and periodic expenses. But you could also use the money on non-essential things like dining out or traveling. Ideally, you'd use this extra money to increase your savings, especially if you don't have an emergency fund. On the other hand, if you have more income leftover after listing your expenses, you can increase certain areas of your budget. It's a good idea to reduce these costs and regularly make adjustments to the amount of money you spend so you can avoid debt. This may include reevaluating how much you spend on groceries, household goods, streaming subscriptions and other flexible costs. You should review your variable expenses to find ways to cut costs in the amount of $300. If you notice that your expenses are higher than your income, you'll need to make some adjustments.įor instance, let's say your expenses cost $300 more than your monthly net pay. The last step in creating a budget is to compare your net income to your monthly expenses. If you find that the average you spend on groceries each month is $433, you may want to round up and set the spending limit to $450. To calculate the average amount you spend on groceries, for example, add up all of your grocery spending during the past three months and divide by three. But fixed utilities, such as electric and gas, and variable costs, such as dining and household goods, often fluctuate month-to-month, so you'll need to do some math to find the average.įor these categories and any where you spending changes from month-to-month, determine the average monthly cost by looking at three months worth of spending. For example, debt repayment on a mortgage or auto loan will cost the same each month. You can look up your spending on bank and credit card statements.įixed expenses are easier to list on your budget than variable expenses since the cost is generally the same month-to-month. Investing +More All Investing Best IRA Accounts Best Roth IRA Accounts Best Investing Apps Best Free Stock Trading Platforms Best Robo-Advisors Index Funds Mutual Funds ETFs BondsĪfter you separate fixed and variable expenses, list how much you spend on each expense per month. Help for Low Credit Scores +More All Help for Low Credit Scores Best Credit Cards for Bad Credit Best Personal Loans for Bad Credit Best Debt Consolidation Loans for Bad Credit Personal Loans if You Don't Have Credit Best Credit Cards for Building Credit Personal Loans for 580 Credit Score Lower Personal Loans for 670 Credit Score or Lower Best Mortgages for Bad Credit Best Hardship Loans How to Boost Your Credit Score Taxes +More All Taxes Best Tax Software Best Tax Software for Small Businesses Tax Refunds Small Business +More All Small Business Best Small Business Savings Accounts Best Small Business Checking Accounts Best Credit Cards for Small Business Best Small Business Loans Best Tax Software for Small Business Personal Finance +More All Personal Finance Best Budgeting Apps Best Expense Tracker Apps Best Money Transfer Apps Best Resale Apps and Sites Buy Now Pay Later (BNPL) Apps Best Debt Relief
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